Who Will Win the Mobile Payment Adoption Race?

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When Apple revealed its Apple Pay last September, CEO Tim Cook said the mobile payment service "will forever change the way we buy." And during last week's earnings call, Cook called 2015, "the year of Apple Pay." Additionally, last week's announcement from Google that it's working with AT&T, Verizon Wireless, and T-Mobile to pre-install Google Wallet on all of the providers' Android phones, further positions mobile pay as on the verge of going mainstream.
Mobile Engagement

When Apple revealed its Apple Pay last September, CEO Tim Cook said the mobile payment service "will forever change the way we buy." And during last week's earnings call, Cook called 2015, "the year of Apple Pay." Additionally, last week's announcement from Google that it's working with AT&T, Verizon Wireless, and T-Mobile to pre-install Google Wallet on all of the providers' Android phones, further positions mobile pay as on the verge of going mainstream.

Although Apple's and Google's investments in mobile payment will accelerate momentum for mobile pay adoption, evidence shows consumers still have misgivings about using their smartphones to pay at the register.

In fact recent data from Walker Sands finds consumers are apprehensive about going totally digital. The "2015 Future of Retail Study" reveals that even though the majority of consumers carry $20 or less in their wallets, 8 in 10 consumers are still hesitant about using mobile payments services, with security (57%) and privacy (48%) raising the most significant concerns.

Walker Sands, which has conducted the study two years in a row, has found that consumers are carrying less cash, but still think of it as the most secure form of payment. Dave Parro, director of the firm's retail technology practice, said the biggest obstacle to adoption right now is concern around security and privacy. Parro said in the study, only 1 in 100 consumers listed mobile apps as the most secure form of payment. Parro said he believes consumers' hesitation to adopt is a result of all the recent retail hacking, although all the incidents were related to POS.

With that said, mobile payments can only be secure if there is a strong authentication mechanism in place. Retailers must be able to bind the identity of the user to the authorization of the transaction. While large retailers are familiar with data protection requirements, companies with less data handling experience will need to be mindful of authentication and risk assessment.

"For smaller retailers, [slow adoption] a cost issue or they just have a set way of doing things," Parro explained. "And bigger retailers don't want to hand over their payments to Apple or Google which is why you see them banding together to develop their own currency."

Because mobile payment is a relatively new technology there's no a huge incentive to embrace it yet, but Parro expects adoption will accelerate over the next year and retailers will be forced to adopt. He added that the company (Apple or Google) that can first successfully convince consumers that mobile is a secure form of payment will win the adoption race. However, Apple Pay is in the lead, he added.

"The more commonplace [mobile payment] becomes, the more consumers will become comfortable," Parro said. "It's a matter of getting consumers to change their habits."

EXPERT OPINION
EXPERT OPINION